Andy,
There is no easy answer. I replaced my 1995 850 with a 2001 V70 a few month ago.
All Volvos lose their value quickly, which indeed makes them great value, since they can last for a long time. I think this is partially due to their low reliably (real or perceived), so after the warranty expires, price drops a lot.

2001 V70 is known for its bad ETM module, but this year is covered by Volvo's 10 year/200K miles warranty for the ETM system).

2001 V70 is a larger car, longer base. Not sure if the front space is larger, but the seat can be moved far back. It is comfortable, much quieter than older body style. Suspension in my V70 feels almost Oldsmobile-like after the 850, but the car handles well and holds the road.

So far (at 39K to 45K miles) I had two problems - auto-dimming mirror broke (does not dim), and climate control does not adjust temperature. Both worked well, and simply broke by themselves, unprovoked).

If you plan to repair it yourself, keep in mind that many parts are software-controlled and hard to troubleshoot without dealer's computer. But there is not much you can do about it - most newer cars are like this.

You will find these problems on most European cars - small stuff breaks, repair is expensive, but the cars runs.

I think you should not be afraid of 2001 V70. All depends on the price, too.
I think used Volvos are true bargains. For $11K you can get a 2001 or so car, with many options, leather, etc, and with many years and many thousand miles left in it.